compare the after-tax returns for a corporation that invests in preferred stock with a 12% dividend yield versus a common stock with no dividend but a 16% capital gain. the corporation's tax rate is 21%. the: multiple choice common stock returns 2.32% less than the preferred. common stock returns 2.60% less than the preferred. preferred stock returns 1.90% less than the common. returns are equal on an after-tax basis.

A different kind of equity known as preferred stock gives investors ownership in a firm and the right to receive income from that company's operations. In comparison to common stockholders, preferred stockholders have a stronger entitlement to distributions (such as dividends). In terms of corporate governance, preferred stockholders typically have no or few voting rights.

Preferred stocks provide a company with an alternative source of funding, such as pension-led funding. In some circumstances, a company can delay dividend payments by falling behind on payments with little penalty or risk to its credit rating, but such a move may make it more difficult for the company to meet the terms of its financing agreement.

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